Disclosing Plan to Pay Pemex Debt Caused Cost to Rise, AMLO Says

(Bloomberg) -- Mexico President Andres Manuel Lopez Obrador said Wednesday that disclosing his plan to prepay debt of Petroleos Mexicanos caused the cost of that transaction to rise, suggesting the operation may be off the table for now.

Bond prices leaped for Pemex, as the state-owned oil company is known, after the president on Sept. 6 began talking up his debt plans at his morning press briefing, making the operation itself more expensive. 

The president said at the time that he planned to use at least part of $12 billion in funds recently transferred to the central bank’s reserves from the International Monetary Fund to reduce Pemex’s $115 billion debt burden. The company’s bond prices spiked again the following week after Mexico said it purchased $7 billion of international reserves from the central bank. 

Read More: Mexican President Talks Up the Very Bonds He Plans to Buy

“We spoke here about using resources that were being given to Mexico, that we were thinking about the possibility of buying bonds to pay debt, especially Pemex debt,” AMLO, as the president is known, said at his Wednesdsay morning briefing. “Do you know what happened? The interest on Pemex bonds increased because of what are called vulture funds, which are speculative.” 

AMLO’s press office didn’t immediately reply to a request for comment on the status of the debt repayment plan.

The $7 billion may not go to Pemex and could be used to make upcoming sovereign debt payments, two people familiar with the matter told Bloomberg News last month. A third person said that while the funds may be used to buy back Pemex debt in the end, there are other possibilities currently under analysis, without elaborating.

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